On July 1, 2014, Flanagin Corporation issued $2,138,300, 10%, 10-year bonds at $
ID: 2498426 • Letter: O
Question
On July 1, 2014, Flanagin Corporation issued $2,138,300, 10%, 10-year bonds at $2,428,909. This price resulted in an effective-interest rate of 8% on the bonds. Flanagin uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.
Date
Account Titles and Explanation
Debit
Credit
FLANAGIN CORPORATION
Bond Premium Amortization
Effective-Interest Method—Semiannual Interest Payments
Semiannual Interest Periods
Interest to Be Paid
Interest Expense
Premium Amortization
Unamortized Premium
Bond Carrying Value
Issue date
1
2
3
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2014
Date
Account Titles and Explanation
Debit
Credit
July 1, 2015
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2015
On July 1, 2014, Flanagin Corporation issued $2,138,300, 10%, 10-year bonds at $2,428,909. This price resulted in an effective-interest rate of 8% on the bonds. Flanagin uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.
Explanation / Answer
Journal Entry for issue of bonds
Note: the nominal amount of 15.45 at the end of the pperiod is due to rounding off difference in Excel.
Date Debit Credit July 1 2014 Cash 2428909.00 10% 10 year Bonds 2138300.00 Premium on bonds 290609.00Related Questions
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